Iowa is the best state to retire: Here’s why it won Bankrate’s top honors

It’s official – Iowa is the best state to retire in, according to Bankrate’s 2023 survey. The Midwest state topped the rankings due to its low crime, good healthcare options and affordability.

Affordability was a key reason for the win, since many retirees live on limited incomes. In fact, 41 percent of people who say they’re not financially secure point to the insufficient retirement funds as a key reason, according to Bankrate’s 2023 financial freedom survey. A full 42 percent of respondents pointed to their lack of emergency savings as a reason for financial insecurity.

But whether you have one of the best retirement plans or not, Iowa can be an attractive place to retire, especially if you need somewhere affordable.

Key stats about retirement

Why is Iowa the best state to retire in?

Iowa scored the best overall total in Bankrate’s survey, which was based on the following factors and then weighted:

• Affordability (40 percent): Iowa ranked 3rd. This factor includes property taxes, state and local sales tax, homeowners’ insurance premiums and cost of living index.
• Well-being (25 percent): Iowa ranked 31st. This factor includes the number of adults 65 and older per capita, community well-being index, diversity index by state, and arts, entertainment and recreation establishments per capita.
• Quality/cost of healthcare (20 percent): Iowa ranked 11th. This factor includes the cost of healthcare per capita, health care establishments per capita and state health system performance.
• Weather (10 percent): Iowa ranked 38th. This factor includes the number of natural disasters and historic average temperature.
• Crime (5 percent): Iowa ranked 12th. This factor includes the crime rate per state.

“For many Americans, a comfortable retirement may feel out of reach,” said Bankrate analyst Alex Gailey. “Relocating to a more affordable state like Iowa may be a good alternative for retirees who have tighter budgets but want to retire comfortably.”

Most affordable state to live in

With the heaviest weighting in the overall ranking and a high performance from the state – third place in the category – affordability helped Iowa score well overall. Strong affordability was the biggest factor in the state being named the best for retirement.

The cost of living in Iowa for an individual is $1,512 per month, including rent, according to LivingCost.org. That’s about 73 percent of the cost of the U.S. average, making Iowa considerably more affordable.

Not surprisingly, then, various day-to-day expenses also mostly cost less than national averages, according to the Council for Community and Economic Research:

• Housing is 28 percent less
• Utilities are 6 percent lower
• Food is 2 percent more expensive
• Healthcare costs 8 percent more
• Transportation costs 2 percent less

Iowa’s median home costs just $239,000, according to Redfin data — a far cry from the median American home price of $388,800.

Meanwhile, Iowa ranks middle of the pack when it comes to taxes. It’s 23rd in property taxes, with a median assessment of $4,012 annually, according to Bankrate data. And the state comes in 22nd for state and local sales taxes. Iowa’s individual tax rate tops out at 6 percent.

But it may be especially advantageous for retirees, since the state doesn’t tax Social Security. Residents age 55 and older also can avoid paying state taxes on retirement income for 2023.

State with the best healthcare

Iowa also scored well in healthcare, which carried a 20 percent waiting in the rankings. Overall, Iowa ranked 11th here, making it a significant factor in the state’s overall ranking. The factors affecting this ranking include healthcare cost per capita, health care establishments per capita and state health system performance.

Healthcare is an enormous expense for older Americans, and one that many seem to underestimate. Americans estimate that a couple retiring in 2022 would spend $41,000 on healthcare while retired. In contrast, Fidelity Investments figures that a 65-year-old couple retiring in 2022 would need an average of $315,000 for healthcare expenses during retirement. That number includes estimates of $150,000 for men and $165,000 for women.

When it comes to overall healthcare spending, Iowa ranked in the upper half, with the 19th lowest amount, or $9,789 annually. In contrast, Utah was the lowest at $7,522, while New York was the highest at $14,007.

The healthcare ranking also looked at each state’s population per healthcare establishment to gauge physical access to healthcare. The lower the figure, the more prevalent healthcare facilities are.

On this measure, Iowa ranked in the upper half, with the 20th most establishments per capita. The state has a facility for every 274.4 residents. Leading the pack was Alabama at 209.8, while Alaska sat in last place at 375.1 citizens per healthcare facility.

The final criterion for the healthcare ranking was the state health system performance, and it measures how well the healthcare system is working in each state. On this measure, Iowa ranked in the upper third of states, at 16th. The top-ranked state was Hawaii, while Mississippi was the lowest-ranked.

Healthcare expenses remain one of the fastest-growing expenses – rising about 6 percent annually, according to one estimate – and they particularly affect older Americans, given that many are on fixed incomes. It can make sense to plan for healthcare costs as early as possible and understand what is and isn’t covered by Medicare.

One of the safest states in the U.S.

Crime holds the lowest weight in the Bankrate scoring system, just 5 percent, and so Iowa’s good score there doesn’t carry much weight in its overall score. The state scores among the lower third of states in terms of the lowest violent crimes and property crimes.

Here’s are the raw numbers and where Iowa ranked in each category:

• Violent crime: In 2020 Iowa had 266.6 violent crimes per 100,000 residents, putting it in the 13th best position.
• Property crime: In 2020 Iowa had 1,733.7 property crimes per 100,000 residents, ranking the state 16th.

After weighting these factors, Iowa ranked 12th overall in terms of crime.

The table below provides the states with the best and worst crime rates in 2020, how Iowa performed and how the average U.S. state performed.

* Crimes per 100,000 residents, 2020

Things to consider before moving to Iowa

While Iowa scored well on some key categories, it didn’t ace all the categories, so those thinking of moving to Iowa will want to consider all dimensions of the state to see whether it’s a fit. In particular, Iowa scored in the bottom half when it came to well-being and weather. So potential new Iowans should consider the low demographic diversity and the high potential for tornadoes.

“Iowa’s low cost of living, affordable and high-quality health care and low crime make it a compelling option for retirees looking to stretch their retirement income in this economy, but it’s important to be aware of its drawbacks,” Gailey said. “Where you choose to retire will ultimately depend on your financial goals and priorities in retirement, and our ranking is simply a starting point for making that decision.”

Quality of well-being

The quality of well-being made up 25 percent of the overall score, and it’s an area where Iowa didn’t score especially well, coming in 31st among states. The key factors here included the number of adults 65 and older per capita, the community well-being index, the demographic diversity index and arts, entertainment and recreation establishments per capita.

Retirees looking for someone their age won’t have any particular issue finding them, according to the overall figures. The population that’s age 65 and older is 18.3 percent of the total population, putting Iowa right in the middle of the rankings.

However, those looking for racial or ethnic diversity may be disappointed. About 87.9 percent of the population is White, while 3.7 percent is Black or African-American. About 2.5 percent is Asian, and 3.9 percent is two or more races. The state has a strong heritage from Western Europe, in particular with German (35.7 percent), Irish (13.5 percent) and English (9.5 percent).

Unless you live in one of Iowa’s handful or relatively small cities, the population density is sparse. The most populous city is Des Moines, with just 210,000 residents, followed by Cedar Rapids at 130,000 inhabitants. So those who like low population density – and the things that often come with it, such as lower housing prices – may find it quite pleasant in Iowa.

Prone to natural disasters and cold weather

Iowa also did not score well in the weather category, which contributed 10 percent of the total score. The harsh winters and tornado-prone environment hurt Iowa in the rankings here.

The average annual temperature in the state from 2000-2020 was 48.6 degrees, according to data from the National Oceanic and Atmospheric Administration (NOAA). That ranked Iowa as the 34th warmest state. For comparison, Hawaii ranked first, with an average temperature of 74.5 degrees, while perennial retirement destination Florida came in second at 71.6 degrees.

Iowa also fares poorly when it comes to tornadoes, ranking as the 45th worst state for them. From 2013 to 2022, the state had an average of 55 tornadoes a year.

So those looking for a sunny and relaxing climate after decades of working won’t likely find it in Iowa.

How much can I afford?

If you’re thinking about retiring to Iowa, the good news is that it’s highly affordable, even with today’s higher interest rates. Iowa’s low cost of housing – the largest expense for most families – means that your money can go a long way, especially if you plan carefully. Determining how much money you need to buy a house is one of the first steps if you’re considering a move.

This Bankrate calculator can help you figure out how much house you can afford.

Of course, it’s not just housing that’s relatively cheap in Iowa. The overall cost of living is less there, too, meaning every dollar you earn buys more – especially beneficial if you’re on a fixed income. In 2022, Iowa was in the top 10 states with the lowest cost of living.

If you’re moving from a bigger city and you don’t own a car, then you’ll probably have to buy one in Iowa, given the lower population density. That may be an additional expense, compared to the cost of living in a large city, but Iowa may still come out ahead in terms of overall cost. Here’s how to figure out how much car you can afford and how to calculate it.